Vicinity to sell $1bn worth of shopping centres
Listed retail landlord Vicinity Centres is set to sell up to $1 billion of smaller shopping centres as the group unveils a strategy of focusing on flagship destination assets.
The landlord will use the proceeds of the asset sale to reduce gearing and redevelop some centres, including the addition of mixed-use elements such as apartment towers.
The plans come amid a challenging retail environment, with cautious consumers worrying about lacklustre wages growth or turning to online shopping platforms such as Amazon.
“You’ve got to, in a challenging environment, specialise more than you had to in the recent past,” Vicinity chief executive Grant Kelley tells The Australian.
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“Most of our competitors, in fact all of them, have specialised in one of two ways. Either they’ve specialised in the destination, big box, market-leading, hospitality dining entertainment strategy, which is very much our articulated strategy. Or they’ve specialised in convenience centres.
“And it’s possible to make money in each scenario… but you’ve got to specialise.”
Kelley downplays comparisons to global mall giant Westfield, which focuses on the largest flagship malls and has recently been taken over by European landlord Unibail-Rodamco.
Vicinity has a “significant” mixed-use development opportunity at its destination centres that will set the company apart, he says.
The sale process made more sense than spinning off the non-core assets into a new listed company as earlier proposed by Macquarie analysts, Kelley says, warning that a spin-off would divert employees’ focus.
Since the group was formed in 2015 through the merger of Novion Property Group and Federation Centres it has sold 23 assets for $1.9 billion. Assuming an average value of $82.6 million per centre, it appears about a dozen assets will now be for sale.
The sales campaign will start this month and the company hopes to complete the divestments as quickly as possible, with assets worth about $30 million to $100 million each likely to be on the block.
The centres in focus are in Queensland, NSW, Victoria and Western Australia, and while a sale in one line would be preferred, the deal could also be split into groups of like assets or individual centres, The Australian understands.
Prospective buyers might include landlords focused on neighbourhood centres such as Charter Hall’s listed retail fund or unlisted partnership, the listed Shopping Centres Australasia Property Group, or fund managers such as ISPT.
Vicinity has appointed JLL as its real estate adviser working with Macquarie Capital as its corporate advisor.
The sales proceeds will be used to reduce gearing by about 450 basis points and redeployed into developments including The Glen and Box Hill Central in Melbourne, Galleria in Perth and Chatswood Chase and Bankstown Central in Sydney. The Bankstown and Box Hill centres in particular could be home to new apartment towers.
The group expects about one cent dilution on an annualised basis on funds from operations per security before the reinvestment of proceeds.
CLSA’s Michael Vincent says in a note to clients that the sale plans are “not unsurprising, given the need for Vicinity to address its asset portfolio quality”.
“The developments will take time before they become income generating, and as such the dilution impact may linger before recovering,” the broker writes.
– with Ben Wilmot
This article originally appeared on www.theaustralian.com.au/property.
